Inside Foursquare’s Plan to Become Profitable
Newly appointed Foursquare CEO Jeff Glueck stopped by Fortune’s New York headquarters last week to discuss his plans to make the seven-year-old company profitable.
Most people know New York-based Foursquare as the “check-in” company, the primary purpose of its original, eponymous mobile application. (The idea: Check in to a location, such as a pizza shop or movie theater, and let your friends know where you are. It was a novel idea in the early days of the smartphone.) That feature quickly became ubiquitous, forcing the company to shift strategies to maintain its growth, even as it collected plenty of location data along the way.
Today, Foursquare is a “location intelligence company,” Glueck says. “We’re a technology company that uses location intelligence to enrich consumer experiences and inform business decisions.”
The company last week announced that it raised $45 million in new funding. The catch: The so-called down round valued the company at $250 million, less than half its previous valuation and a black eye of sorts in the hype-fueled world of tech startups.
Nonetheless Glueck is bullish on the company’s prospects. Instead of making money from consumers it’s looking to big businesses, the chief executive says. That’s where real value is.
Below are some of his remarks, edited and condensed for clarity.
Fortune: Explain this data-based business model.
Glueck: Think about what IBM (IBM) just did with acquiring The Weather Company. Big data is really powerful for the future of business decisions—decisions that have been made in the past on hunches or stale sources of data. Why is IBM interested in the Weather Channel’s back end? It believes that weather patterns impact employees and logistics and marketing decisions and so forth.
The Weather Channel has global, real-time weather data. Foursquare has global, real-time foot traffic data—the pulse of the world economy in the physical world, which in the U.S. is 93% of consumer spending. E-commerce is 7% and growing fast, but it’s still dwarfed by [commerce in] the physical world.
So let’s say you run a chain of movie theaters across the country and want to advertise to people who frequent theaters. Using our first-party community—50 million monthly active users across website and apps globally—we can measure whether a consumer who sees an ad for that movie theater, which we served to movie enthusiasts, is more likely in aggregate to show up at a theater in the next seven days.
How does this work, exactly? So let’s say my father-in-law likes hamburgers…
Say your father-in-law has a favorite weather app and checks the weather everywhere he goes. He likes to go to gourmet burger spots and movie theaters. Because he checked the weather forecast in movie theaters seven times in the last few months, he’s part of a segment we identify. We understand the theaters, their Wi-Fi scans, their Bluetooth beacons. We can identify when that phone is in a theater.
So we build a segment for an advertiser of movie enthusiasts and run advertising for them on third-party exchanges, which display across thousands of apps and websites. We come back to the core users, who give tips on where they go, and that’s a Nielsen-like panel. It’s a way to measure whether the ads worked because we can look at people who saw ads for movie theaters [and ask], did they walk into the theater versus people who didn’t but have similar characteristics? It’s not one visit that tells you anything.
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The holy grail of advertising is measuring whether it works. If you run a business with thousands of consumer locations, you’re jealous of websites because they know whether their ads work. So how do you run a physical business like a website?
That’s really the secret sauce. The fact that measure the digital signatures of any business in over 100 countries. Its actual shape, connection points that are nearby, et cetera.
And what about non-advertising applications?
Maybe you’re a Wall Street analyst and you want to know if the new iPhone 6s will be a success. So we look at foot traffic at Apple stores in the weeks before it was available, correlate it to past launches, and predict how many phones it will sell. Foot traffic is a pretty good barometer, it turns out. Investors want to know this information. So do Apple’s competitors.
McDonald’s launch of all-day breakfast: How it’s going, two weeks in, if the company makes no pronouncement? We can tell.
We think this is really unique and valuable data for decision-making. Our B2B businesses—Pinpoint [Foursquare’s ad platform] and enterprise and developer tools—are now majority of revenue. That’s the path to profitability for us.
After Foursquare was criticized for not meeting its lofty initial hype, you said that maybe Foursquare never could have been the next Facebook. Facebook was No. 242 on this year’s Fortune 500. Could Foursquare maybe one day be a Fortune 500 company, at least?
We’re actually more ambitious now than ever. Maybe one day we could be a Fortune 500 company. Location intelligence is expected to be a $40 billion market. Right now we’re focused on becoming profitable and driving toward $100 million in revenue. After that we’ll talk.